A federal District Court in Wisconsin has dismissed a suit by a local Girl Scout council seeking to prevent the national Girl Scout organization from forcing a realignment of the local council as part of a national reorganization effort.
Although the Court found that the national’s effort would violate the Wisconsin Fair Dealership Law regulating the conduct of franchisors that substantially change their dealership agreements, the Court also found that enforcement of the law would be an unconstitutional infringement on the national’s freedom of expression. It also found that the national had not breached its contract with the local or violated any other principles raised by the local. (Girl Scouts of Manitou Council v. Girl Scouts of the U.S.A., E.D. WI, No. 08-CV-184, 3/31/10.)
In a 147-page opinion and order, the Court spelled out at length the structure of the Girl Scouts of the USA and its processes in seeking to reorganize its structure nationally. Chartered by Congress in 1950, the national organization operates as a federation, carrying out its goals through individual councils that are separate legal entities granted a charter by the national to conduct their programs. The national is governed by a National Council including delegates from each local council. Governing documents for the federation are spelled out in a Blue Book of Basic Documents.
Beginning in 2004, after several independent studies, the National Council began to seriously study a reorganization. In 2005, the National Board of Directors approved a recommendation to develop a nationwide council realignment to reduce the number of councils, increase their coverage area and reduce competition for funding, and serve as a basis for future growth and sustainability.
In 2006, the national recommended that 13 existing councils in Wisconsin be merged into three. The “high performing” Manitou Council, covering 7 counties in eastern Wisconsin would be affected by the change. Although the leaders of the Manitou Council originally expressed interest in the proposal, relations with some of the other affected councils fell apart, and the Manitou Council began to oppose the proposal.
After many negotiations and meetings over about two years, the parties could not reach an amicable agreement, and the national advised Manitou that its jurisdiction would be divided between two councils in the final realignment plan. Manitou sued for a preliminary injunction, which was denied by the trial court. The Court of Appeals, however, reversed and granted the injunction against moving on the reorganization plan until the merits of the case could be decided.
In a motion for summary judgment, Manitou argued that the National Council had violated the state’s Fair Dealership Law. The Court agreed that the changes in the relationships were so great that it amounted to a “constructive termination” of the relationship, and that the National Council did not have “good cause” as defined by the statute. But relying heavily on the U.S. Supreme Court opinion allowing the Boy Scouts of America to ban homosexuals, the Court said enforcing the statute against the Girl Scouts would violate their right to expressive speech.
“The application of the WFDL in this case is a direct affront to the Girl Scouts’ reasoned efforts to organize and direct itself in a means it judges most effective in proclaiming its expressive message,” the Court wrote. “Moreover, as the record indicates, the sheer number of councils within the Girl Scout organization tended to dilute the national organization’s message and, having Manitou maintain the entirety of its jurisdiction against the wishes of the [national], would similarly affect the message of the expressive association. In addition, the natural result of summary judgment for Manitou on the WFDL claim would allow Manitou and its executives, a group who has an ideological conflict with the national organization over the long term goals of Girl Scouting, administering the expressive message for the organization in seven counties in Wisconsin…. In short, application of the WFLD in these circumstances will adversely affect [the national’s] expressive message.”
The Court also ruled that the changes did not constitute a breach of contract, largely because the national followed the procedures in the Blue Book, which give the National Board of Directors authority, in its sole discretion, to revoke any local charter to further the best interests of the Scouts, and because there was no showing that the national had breached an implied covenant of good faith.
The Court similarly looked at every other claim by Manitou and granted summary judgment for the national on its motion to dismiss all claims. The other claims included tortious interference, economic coercion, civil conspiracy, and breach of fiduciary duty.
YOU NEED TO KNOW
This is a classic example of the question of “Whose organization is it?” (See Ready Reference Page: “The Key Question: Whose Organization Is It?”) If you assume that the Girl Scouts is a national movement carried out through subordinate local councils, ultimately the national organization has to have the authority to impose its will upon local chapters in order to maintain control of the organization. Most national organizations that view themselves as top down, rather than bottom up, organizations write pretty strong powers into their affiliation arrangements to assure that control.
The local’s use of the fair dealership law, originally written to protect auto dealers and other for-profit businesses from financial coercion, seems to be a clever stretch. The Court’s reliance on a constitutional right of freedom of expression to avoid the impact of the law, seems also to be a stretch.